Ranbaxy Drug Safety Scandal
Eight years after the family that controlled Ranbaxy Laboratories sold their share of the company, they have been ordered to pay $400 million to Daiichi Sankyo for not disclosing information about their many lapses in quality control.
On Thursday, an arbitration panel declared that Malvinder Mohan Singh and Shivinder Mohan Singh did not reveal the full truth of Ranbaxy’s operations when they sold Daiichi their shares of the company for $2.4 billion.
When the deal occurred, Ranbaxy was one of the leading providers of generic drugs to India and several other countries, the United States included. To Daiichi, purchasing shares of Ranbaxy seemed like an obvious and easy way to grow into an even larger supplier of pharmaceuticals across the world.
The Shattered Dream
That dream did not last long, however. Only a few months after Daiichi purchased Ranbaxy, there were several manufacturing violations. These violations led the U.S. Food and Drug Administration (FDA) to ban over two dozen of Ranbaxy’s drugs from entering the U.S.. To say that this hurt Daiichi’s plans and income would be a massive understatement.
The issues were much more severe than accidentally filling out forms incorrectly. A former Ranbaxy executive revealed that they falsified reports to the FDA and did not conduct proper tests on their medicines. There was a thorough investigation of these claims in 2013, and they resulted in Ranbaxy paying a $500 million fine to the FDA as well as acknowledging their guilt in two charges of violating drug safety laws in the U.S..
That was far from the end of the nightmare for Daiichi, though. The FDA banned Ranbaxy drugs from two separate plants from entering the U.S. after investigating the plant processes. At that point, Daiichi felt he was unfairly suffering for the things that the previous owners of Ranbaxy had allowed. He decided to finally pursue a lawsuit for damages against the Singh brothers.
The Legal Battle
In the court, Daiichi argued that he was not aware of the various ways in which Ranbaxy was cutting corners and thus was not told relevant information during the deals for the Singh brothers’ shares. According to Daiichi, they ruined him from the moment they decided not to sell the shares to him without informing him of the various illegal practices that Ranbaxy was conducting.
The Singh brothers offered another story. According to them, Daiichi only pursued the lawsuit to shift the blame for his incompetence onto them. According to them, Daiichi was the one responsible for the illegal measures and they accepted no blame for the legal trouble that Ranbaxy found after they sold the company.
In the end, the court found in favor of Daiichi and ordered the Singh brothers to pay him $400 million for not telling him about the illegal practices that Ranbaxy conducted. While this is a happy ending for Daiichi, it has a serious impact on other Indian drug manufacturers.
Indian pharmaceutical companies are some of the largest producers of generic drugs in the entire world. This fiasco raised a lot of concern in the U.S. and around the world about purchasing drugs from Indian companies, and consequently could hurt the entire industry. It is unclear what kind of lasting effects this may have on India’s generic drug producers.
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